The Australian share market continued its recent trend of positive returns, with the S&P/ASX 200 Index gaining by 2.3% to close the month of July at 8,742.8 points.
Global share markets had a positive month of returns in July despite the looming United States 1 August tariff deadline. The United States S&P500 Index gained by 2.5%, the London FTSE Index gained by 4.7%, the Japan Nikkei 225 Index gained by 1.4%, and the Hong Kong Hang Seng Index gained by 2.9% for the month.
The Australian dollar fell by 2.5% in July, with 1 Australian Dollar currently buying 64.5 United States cents.
As shown in the chart below, this is the first monthly fall in the Australian dollar since December, and is mostly down to the different outlook for interest rates between Australia and the United States economy.
Source: Australian Financial Review, Bloomberg
Notwithstanding the above, the Reserve Bank of Australia (RBA) board surprised markets in July by keeping the Cash Rate on hold at 3.85%. However, data released late in the month confirmed that the Consumer Price Index for the June quarter slowed to an annual rate of 2.10% - the slowest rate of growth in three years.
Consequently, interest rate traders now assign a 90% chance that the Cash Rate will fall three times before the of the end year, with financial markets fully priced for a 0.25% per annum move lower on 12 August and a 44% chance of a back-to-back interest rate reduction in September.
This prospect of lower interest rates is good for economic confidence and generally supportive of higher asset values.
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This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation, and investment objectives.